I want to invest Rs 20,000. I want to invest it across different categories to get the maximum returns. How do I diversify?
--Shridhar Ravi
It is not clear whether you are making a one-time investment or you are planning to start investing via monthly SIP. You also have not shared your investment horizon and risk profile. We always tell our readers to choose mutual funds based on their investment objectives. If you are investing for a short period, you should invest in debt funds. If you are investing for a long period, you should invest in equity funds.
However, you should choose your schemes based on your risk profile.
For example, if you are looking to create wealth over a long period of time without too much risk and volatility, you may choose large cap funds. If you have a moderate risk profile, you may opt for flexi cap funds. If you have higher risk appetite, you may invest in mid cap, small cap, sector schemes, etc.
If you are making a one-time investment, you may go for a single scheme that matches your investment objectives. If you’re investing via SIP, you may go for one or two schemes. Don’t invest in too many schemes. It often leads to over diversification and duplication of portfolios and dilutes overall returns.
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